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City Council Regular Meeting Minutes October 13, 2009 Page 2 IV. PUBLIC HEARING. 3 None. 4 5 V. REPORTS FROM COMMISSION AND STAFF. 6 7 None. 9 VI. GENERAL BUSINESS OF COUNCIL. 10 11 A. Update on Tiered Water Rates 12 13 City Manager Monson reported that Minnesota Statutes, Section 103G.291 was amended to 14 include a requirement for public water suppliers serving more than 1,000 people to adopt a water 15 rate structure that encourages conservation. To comply with the law, effective January 1, 2010, 16 cities must implement a tiered system of water rates that charges a higher rate per unit as water 17 usage increases. The conservation rates are for all user groups including residential, multi -family 18 and commercial users of water. This is the fourth City Council meeting on this subject. Staff was 19 directed to contact the DNR to request a one-year extension. The DNR has denied the request 20 indicating the law does not give the DNR the authority to grant extensions. City Manager 21 Morrison indicated Council will be asked to provide direction on the following: 22 ■ Base Rate (staff recommendation to leave the base rate at $2.60 per 1,000 gallons). 23 ■ Percentage split between tiers 24 z Amend Ordinance 33.036 to include Tiered Water Rates (three readings required). 25 26 Finance Director Larson and City Manager Mornson provided a PowerPoint presentation on the 27 proposed City of St. Anthony Tiered Water Rates. They provided the following information in 28 response to questions of the City Council. 29 30 Based on staff's discussions with the DNR, the DNR will accept the rate structure being 31 considered by St. Anthony. The DNR would like a high differential between the tiers, but there is 32 no penalty if the City does not implement the DNR recommendation. There would be a penalty if 33 the City does not implement a tiered rate system. An example of this would be denial of DNR 34 permits. 35 In regards to the high percentage of commercial users included in Tier I, a large number of those 36 users are on a minimum bill because they do not have much activity. The City Engineer and 37 financial advisors have reviewed all of the tiers and determined that the proposed rate structure 38 appears to be equitable. 39 Rate structures being adopted by other cities varies. There is an approximate 50/50 split in the 40 cities that are increasing the base rate. Of the cities that have implemented a tiered rate structure, 41 all have indicated that a sensitivity analysis will be done to make sure that one group is not being 42 treated unfairly or receiving an extra benefit as a result of the new rate structure. 43 The intent of the DNR law is to change behavior by impacting the rates so that people will take 44 note and move to a conservation mode when they can apply it. The result of the rate structure